What is a gross salary employee benefit?

18.11.23

Many of today’s modern workplaces – including many of those that you’ll find on the annual great place to work shortlist – are finding new ways to boost their workplace offering and support a healthier work life balance for their employees. To facilitate this, many employers choose to offer their workforce the option to purchase tax-free benefits directly from their gross salary.

New technology in areas of employee compensation and benefits have made it much easier for employers to integrate these processes with their payroll and external suppliers, and much easier for employees to browse and purchase these benefits through a personal employee portal.

What’s the difference between net salary and gross salary?

  • The gross-salary income is the salary figure which the employer pays before any taxes, social security (national insurance) payments and other extra salaried costs are deducted. This figure is visible on a person’s monthly pay slip, and so too their end of year annual tax declaration (or statement of earnings). This is the figure which is often used when talking about a person’s total annual- or monthly income amount.
  • The net-salary income (or take-home pay) is the resulting amount after all taxes, social security (national insurance) payments and other extra salaried costs have been deducted.

What are the most popular gross benefits?

Benify is a global provider of employee benefit, engagement and reward solutions – helping clients such as Ericsson, IKEA, L’Oréal, Teva and Vodafone to provide a wide selection of modern benefits for their employees.

In a recent study, Benify asked more than 1,100 HR professionals which workplace benefits they valued the most. The most common answers included popular daily benefits such as:

  • pension and insurance
  • employee healthcare
  • company cars
  • employee childcare
  • more vacation days
  • additional vacation- and/or sick pay
  • health and wellbeing benefits
  • employee discounts

BENIFY_Top_10_Employee_Benefits_2018-1

See the results in full by downloading the Top 10 Benefits report for free today.

Want to know what employees said were their most popular benefits? Download the Employee Happiness Index 2018 today.

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What are the most common gross salary employee benefits?

As a rule of thumb, gross salary benefits are tax-free and therefore usually defined and regulated by local tax authorities. The criteria for tax-free benefits can differ from country to country – and will often depend on the value, purpose and/or the type of benefit which is offered. Some popular gross salary benefits include:

  • Company cars or employee cars (usually a cost-neutral combination of both gross- and net costs)
  • Healthcare benefits (access to tax-free treatments, surgeries and group insurances)
  • Childcare, babysitting and tutoring services
  • Extra occupational pension contributions

Why do employers choose to offer gross salary employee benefits?

Gross salary benefits offer many perks for both the employer and employee. They’re cheaper for the employer, make expensive services much more affordable for the employee and can facilitate a much healthier work life balance. They also offer tangible business benefits for the employer, by boosting the employer brand and helping them to attract and retain top talents.

What are the cost benefits?

  • the employee with more affordable access to a range of healthcare, commuting and other services – the costs of which are then deducted directly from their gross salary. This results in a lower taxable salary for the employee (meaning that they will pay lower income tax on their monthly salary).
  • fewer salaried costs for the employer – such as social fees and insurances. The employer can often then opt to return this saving to the employee as a contribution to the cost of the benefit.

What do employees need to consider before purchasing a gross salary benefit?

While gross salary benefits can offer a whole range of perks for the employee, they must first consider the financial effects which can sometimes be a consequence of regular gross salary deductions. This doesn’t just affect the employees net salary amount, but in some cases, can also affect any ongoing or future welfare benefits they may be entitled to.

An employee’s gross salary is often used by pension and insurance providers (both public- and private) to calculate a variety of things, such as:

  • Vacation pay
  • Sick pay and/or incapacity benefits
  • Pension contributions (both occupational- and state pension)
  • Parental benefits

It is important that the employee understands the full extent of all financial and payroll consequences before choosing to purchase a gross salary deduction. At Benify, we make it possible for employers to tailor the availability of such benefits according to salary, pension and local social insurance regulations – and even submit a targeted message to each employee if a negative financial implication was likely.

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